Medicare s Recovery Audit Contractor (RAC) Program

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© Copyright Conifer Health Solutions, Inc. All Rights Reserved.

Recovery Audit Contractor Update

Medicare’s

Recovery Audit Contractor

(RAC) Program

HFMA Northern California Spring Conference Rudy Braccili Jr, MBA, CPAM

Sr. Director, National Medicare & Medicaid Center April 30, 2009

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Agenda for Today

Status of CMS’ Permanent RAC Rollout

Changes to Demonstration Project’s SOW

Recommended Roles for PFS - Hospital

Tracking RAC Activity

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RAC Demonstration Project

3-year Medicare RAC Demonstration Project lasted from

March 2005 through March 2008

Phase I

2005: California, Florida & New York F.I.’s

Phase II

2007: South Carolina, Arizona, Massachusetts &

Mutual Of Omaha FI hospitals in any of the 6 demo states, plus original phase I states

Permanent RAC National Expansion Plans

CMS competition to hire 4 permanent RACs

A B

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RAC Nation-wide Roll-out Strategy

Permanent RAC Program

- Was originally scheduled to begin March 2008

- Was postponed until October 2008 as CMS took

longer than anticipated to select permanent RAC

vendors

- Postponed again because 2 vendors who were not

selected to be RACs (PRG-Schultz, and Viant) filed a

formal protest. Protest was settled in early February

2009.

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* Region D Region A HDI DCS Region B CGI R e g i o n C Connoly

March 1, 2009 March 1, 2009 August 1, 2009 or later

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RAC Nation-wide Roll-out Strategy

For states scheduled to implement on March 1, 2009…

- RACs have not yet received claims data from CMS

- RACs are in the process of scheduling state specific outreach meetings with providers - in cooperation with local state hospital associations and CMS (March – April)

- Once RACs receive claims data from CMS, they must crunch the data (data mining) to identify areas of high potential payment error. RACs then must seek approval from CMS to audit (April – May)

- Initial audit letters/requests for medical records are not expected to be received by providers until May - July

RAC Vendors by Region

Region A: Diversified Collection Services, Inc.

PRG-Schultz, Inc. sub-contractor

Northeast U.S. States

Region B: CGI Technologies & Solutions, Inc.

PRG-Schultz, Inc. sub-contractor

Northern Industrial U.S. States

Region C: Connolly Consulting Associates, Inc.

PRG-Schultz, Inc. sub-contractor

Southern U.S. States

Region D: Health Data Insights, Inc.

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RAC Regional CMS Contacts

Region A: Diversified Collection Services, Inc.

ebony.brandon@cms.hhs.gov

Region B: CGI Technologies & Solutions, Inc.

scott.wakefield@cms.hhs.gov

Region C: Connolly Consulting Associates, Inc.

marie.casey@cms.hhs.gov

Region D: Health Data Insights, Inc.

marie.casey@cms.hhs.gov

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RAC Validation Contractor

Provider Resources, Inc. Erie, Pa.

- Works with CMS to oversee & audit RAC determinations

- In conjunction with CMS - approves new issues to be targeted by RAC

- All focus areas must be newly approved for the permanent program. Target areas approved during the demonstration project are not carried over to the new program unless newly approved.

Vulnerability Reporting

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Results of the RAC Demonstration Program

Collections exceeded costs

Overpayments Collected: $992.7 m Less Underpayments Repaid: - ($37.8 m) Less $ Overturned on Appeal:

Less PRG IRF Re-review:

-($46.0 m) ($14.0 m) Less Costs to Run Demo: - ($201.3 m) BACK TO TRUST FUNDS

$693.6 m

3/27/05-3/27/08 (Claim RACs & MSP RACs)

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Report now available at www.cms.hhs.gov/RAC

Short stay cases: chest pain, back pain, gastroenteritis

Cardiac defibrillator surgical procedures – appropriateness of setting

Major Bowel Procedures

Discharge Disposition Conflicts with other post-care providers

Incorrect principal diagnosis

3 – day acute qualifying stay for subsequent SNF admission

Outpatient – Inpatient 3-day (aka 72 hour) overlap rule

Outpatient # of units exceed maximum allowable (e.g. colonoscopy)

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Agenda for Today

Status of CMS’ Permanent RAC Rollout

Changes to Demonstration Project’s SOW

Recommended Roles for PFS - Hospital

Tracking RAC Activity

Reporting RAC Activity

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Future - Program Expansion

Lessons Learned

Demonstration RACs Permanent RACs

Look back period (from claim pmt

date - date of medical record 4 years 3 years request)

Maximum look back date None 10/1/2007 Allowed to review claims in current No Yes

fiscal year?

RAC medical director Not Required Mandatory Coding experts Optional Mandatory Discussion with RAC medical

director regarding claim Not Required Mandatory denials if requested

Credentials of reviewers provided Not Required Mandatory upon request

Vulnerability reporting Limited Mandatory RAC must payback the contingency …first level of appeals …all levels of Appeal

fee if the claim overturned at…

Web-based application that allows

providers to customize address None Mandatory by Jan. 1, 2010 & contact

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RACs Must Report Potential Fraud and Quality Issues

Providers Can Repay Overpayments Through Installment Plans up to 12 Months (or Longer with Approval) Settlement Offers will also be considered

RACs Shall Provide a Toll Free Customer Service Line to All Providers

Medicare payment retractions resulting from RAC audit will be uniquely identified on the Medicare remit with remark code N432

RAC may not audit a claim that is being audited by another auditing entity e.g. OIG, QIO - RAC data warehouse will prevent this

RAC Overview

Context - CMS Claims Review Entities

Roles of Various Medicare Improper Payment Review Entities

Types of Purpose of

Claims How selected Volume of Claims Review

To prevent improper All claims where hospital payments through DRG submits an adjusted claim upcoding

Inpatient for a higher-weighted DRG

QIO Hospitals Very small

To resolve discharge Expedited Coverage Reviews disputes between requested by beneficiaries beneficiary and hospital

To measure

CERT All Randomly Small improper payments

Depends on number of claims with improper payments for

this provider

To prevent future improper payments

MAC All Targeted

To detect and

Depends on number of claims

RAC All Targeted with improper payments for this correct past

improper payments

provider

Depends on number of To identify

PSC All Targeted potentially fraudulent claims

potential fraud

submitted by provider Depends on number of

OIG All Targeted potentially fraudulent claims To identify fraud

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RACs are authorized to audit Acute Hospital, SNF,

IP-Rehab, Long Term Acute Care, Laboratory, Home

Health, Physician, DME and Hospice provider types

Medicare Advantage (HMO), Medicare Part-D

(Prescription Drug Benefit), Cost report Settlements, and

IME-GME payments are excluded from the RAC

program

RACs will seek to identify potential overpayments made

to physicians related to hospital accounts where

overpayments have been identified – however this was

not the case during the demonstration program

RAC Overview

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Each RAC must employ a minimum of one FTE contractor medical director (CMD) and arrange for an alternate when the CMD is unavailable for extended periods.

The CMD FTE must be composed of either a Doctor of Medicine or a Doctor of Osteopathy who has relevant work and educational experience.

More than one individual’s time cannot be combined to meet the one FTE minimum.

“…The RAC shall ensure that coverage/medical necessity determinations are made by RNs or therapists and that coding determinations are made by certified coders.

The RAC shall ensure that no nurse, therapist or coder reviews claims from a provider who was their employer within the previous 12 months.

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A RAC “Black-out” period will exist for providers

transitioning from Fiscal Intermediary (FI) to Medicare

Administrative Contractor (MAC) during which no RAC

activity will take place

RAC Overview

RAC Overview

How RACs get paid:

• CMS reimburses RACs using a contingency based payment model

• Payment to the RAC is based on a % of the monies the RAC identifies as overpayments & underpayments

• Contingency percentages paid to the RAC range from 9% -12.5% and vary by region. Variation is due to the competitive bid process

• Program is considered to be “Risk Free” for CMS

• RACs return contingency fee to CMS if case is overturned on

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When underpayments to the provider are identified by

the RAC, the underpayment amount will be paid to the

provider on the Medicare remit. There is no action that

the provider must take to obtain the underpaid amount

When overpayments to the provider are identified by the

RAC and the originally paid amount is retracted in total,

providers must re-bill the ‘adjusted’ claim to the FI or

MAC in order to receive the corrected payment amount

RAC Overview

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RAC Overview

Examples of Underpayments:

The provider billed for 15 minutes of therapy when the medical record clearly indicates 30 minutes of therapy were provided. (This provider type is paid based on a fee schedule that pays more for 30 minutes of therapy than for 15 minutes of therapy)

The provider billed for a particular service and the amount the provider was paid was lower than the amount on the CMS fee schedule.

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Page 23 © Copyright Conifer Health Solutions, Inc. All Rights Reserved. • RAC sends medical record request for complex reviews

It is not clear for each hospital – what specific address will be used. RACs are required to customize addresses as directed by providers in 2010

Providers should reach out to the RAC and provide customized correspondence address – however they are not required to oblige until 2010

Providers have 45 days to submit medical record copies

Records not received within the required timeframe will be denied and full payment will be retracted

Prior to denying due to “records not received” RAC must initiate 1 final contact attempt to provider

RAC Review Process

RAC sends medical record request for complex reviews

• RAC must accept records via fax, paper, CD or DVD

• Records will need to be provided again at each level of appeal

• RACs must pay a $0.12 cents per page copy charge and

first class postage rate for IP records sent

• RACs pay copy & postage fees within 45 days of invoice

• Hospital is notified of RAC decision within 60 days

“Demand letter” is received when an overpayment is identified with reason for determination.

• RAC advises rights of appeal within the body of each “demand letter”

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CMS Limits the Number of Record Requests

Inpatient Hospital, Rehabilitation, SNF, Hospice:

Ten percent of average monthly Medicare IP claims, with a 200 record maximum, per 45 days

Outpatient Hospital, Home Health:

One percent of average monthly Medicare OP services, with a 200 record maximum, per 45 days

RAC Review Process

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Hospitals may:

Agree

with RAC determination – F.I. will “offset”

overpayment $$ against future claims

Submit a

rebuttal

letter (referred to as the “discussion

period”) to RAC

within 15 days of notice

, identifying

grounds for disagreement. RAC has 30 days to

respond. Successful rebuttals will have RAC reverse

their decision. Merely filing a rebuttal does not delay

payment retraction

Engage in

appeal

(5 levels). Interest rate on

overpayment accrues and hospital is obligated to pay

interest if appeal is ultimately denied.

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Page 27 © Copyright Conifer Health Solutions, Inc. All Rights Reserved. FI Review Appeal 15 days 30 days 120 days 180 days

QIC Review Reconsideration

60 days 60 days 60 days 60 days

ALJ Review Appeal ACR Review Appeal

90 days 90 days 60 days

RAC Appeals Process

Demand letter

RAC Appeals Facts

No payment recoupment if level I appeal is filed within 30 days of initial determination. However providers do have 120 days to file the appeal.

No payment recoupment if 2nd level appeal is filed within

60 days of level I appeal decision. However providers do have 180 days to file 2nd level appeal.

Recoupment can occur even with appeal to ALJ – 3rd level

appeal.

All evidence for the appeal must be submitted by level II unless good cause is shown.

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– If an appeal at levels I and II is filed fast enough, paymentIf an appeal at levels I and II is filed fast enough, payment retraction will be deferred. Otherwise retraction will occur within

retraction will be deferred. Otherwise retraction will occur within

31 days of demand notice

31 days of demand notice

– However, while the facility is going through the numerousHowever, while the facility is going through the numerous Medicare steps of appeal,

Medicare steps of appeal, interest will accrueinterest will accrue on the amount on the amount

that is being disputed. Interest rate is 11.375%

that is being disputed. Interest rate is 11.375%

– If the overpayment dispute is overturned at any level of theIf the overpayment dispute is overturned at any level of the appeal process, the interest will be removed

appeal process, the interest will be removed

– If the overpayment dispute is not overturned, then the interestIf the overpayment dispute is not overturned, then the interest fee remains on the account

fee remains on the account

– The overpayment remit retraction will include the interestThe overpayment remit retraction will include the interest

RAC Review Process

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Agenda for Today

Status of CMS’ Permanent RAC Rollout

Changes to Demonstration Project’s SOW

Recommended Roles for PFS - Hospital

Tracking RAC Activity

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Recommended RAC Response

Patient Financial Services Role

• Provide medical records timely to the RAC when requested

• File rebuttals/appeals timely (CRC)

• Consult with hospital professionals when preparing appeals

• Establish working relationship with RAC single point of contact

• Involve regulatory & outside counsel in appeal process

• Track RAC specific patient account activity

• Monitor RAC related Medicare payment retractions

• Re-bill Medicare for re-payment as appropriate

• Refund supplemental payors and Medicare beneficiaries as required

• Provide RAC financial & clinical reports by facility, state, region, total

Recommended RAC Response

Hospitals’ Role

Forward any RAC correspondence/requests to PFS

Provide input during the appeal process

- Involve P.A. and other hospital-based professionals

- Provide supporting documentation not present in the record e.g. Physician Advisor medical necessity notes, UR

documentation, shadow records

Establish a hospital-based RAC task force to review RAC

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Recommended RAC Response

Hospitals’ Role

• Designate a hospital-based RAC Coordinator - Chair hospital RAC task force

- Primary point of contact with PFS & RAC

- Recommend Case Management Director for this role

• Ensure 100% Interqual review of all Medicare IP admissions

• Engage Physician Advisor when Interqual indicates a potentially “failed” medical necessity case and encourage detailed

documentation of the PA review

• Follow-up with SNF - post discharge to ascertain actual level of care provided. Ensure coded discharge disposition matches actual post discharge level of care provided:

03 = skilled level of care 04 = intermediate level of care

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Recommended RAC Response

Hospitals’ Role

• Document I.V. therapy start and stop times within the medical record

• Communicate RAC findings and activity to hospital UR committee

• Ensure that services provided to Medicare patients have documentation present in the record describing the medical condition that exists in support of the service –

Document – Document – Document!

• Role of HCO: Track RAC issues in Compliance Incident Tracking System (CITS), and Evaluate RAC requests to determine

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Recommended RAC Response

Hospitals’ Role

Provide Physician Outreach Education

Best Practices:

• Provide each physician with a list of their records that were audited by the RAC along with the outcome of the review

• Attend physician department meetings to educate physicians

• Visit physician practices to educate them on: - The RAC program

- The importance of patient status assignment i.e. inpatient vs. observation

- Clarity around documenting admission orders - Medicare’s “Inpatient Only Procedures”

- Provide physicians with contact names and numbers

• Implement a Clinical Documentation Improvement Program

Agenda for Today

Status of CMS’ Permanent RAC Rollout

Changes to Demonstration Project’s SOW

Recommended Roles for PFS - Hospital

Tracking RAC Activity

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RAC Tracking Data Components

Demographics

Facility

RAC Audit Letter ID #

Account No.

Patient Name (Last Nm, First Nm)

Medical Record No.

HIC No.

Admit Date

Discharge Date

Total Charges

DRG No.

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RAC Tracking Data Components

RAC Request Data

Name of RAC Firm

Date of Initial RAC Letter (date printed on letter)

Date Initial RAC Letter Received by Hospital

RAC Audit Category (Dynamic Data)

1) Request for Records

2) Documentation Supports Services 3) Not Medically Necessary

4) OP Billed as IP

5) Discharge Status Conflict

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RAC Tracking Data Components

RAC Request Data

Were Records Requested by RAC?

Date Records were Requested by RAC

Date Records Are Required by RAC (45 days after date records requested)

Date Records Sent to RAC by Facility

# of Pages Sent

Copy Cost ($0.12 per page reimbursed)

Postage Cost (first class rate reimbursed)

Total Records Cost Reimbursable by RAC

Amount of Records Cost Reimbursed by RAC

RAC Tracking Data Components

Appeal Data

Letter of Rebuttal Due Date (15

days after date of initial RAC Letter)

Date Letter of Rebuttal Sent to RAC by Facility

Date Response to Rebuttal Received from RAC

Did RAC agree with Rebuttal Letter?

Does Hospital Recommend Appeal?

For each Appeal Level…Appeal Due Date

Date Appeal Letter Sent from Hospital

Date Appeal Response Due back From RAC

Date Appeal Decision Letter Received

Appeal Result (Denial Upheld or Denial Overturned)

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RAC Tracking Data Components

Payment Data

1) Original Payment Data

Original Medicare Pymt Date

Total Original Medicare Pymt Amt

Total Original Supp Pymt Amt

Total Original Pt Pymt Amt

Grand Total Original Pymts

5 Types of Payment Data

2) Retraction/Refund Data

Medicare Retraction DateMedicare Retraction AmountSupplemental Refund DateSupplemental Refund AmountPatient Refund Date

Patient Refund Amount

Grand Total Retraction/Refund Amt

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RAC Tracking Data Components

Payment Data

3) Re-Payment Data

Medicare Re-payment Date

Medicare Re-payment Amt

Supplemental Re-payment Amt

Patient Re-Payment Amt

Grand Total Re-payments

4) Net Payment Results

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RAC Tracking Data Components

Payment Data

5) Non-recoverable Net Payments Lost

(defined as: Net dollars lost after all appeals exhausted)

Medicare non-recoverable net dollars lostSupplemental non-recoverable net dollars lostPatient non-recoverable net dollars lostGrand non-recoverable net dollars lost

RAC Tracking Data Components

RAC Audit Status

Closed – Entire Original Medicare Payment Retracted Closed – Original Medicare Payment Increased Closed – No Change in Medicare Original Payment Closed – Original Medicare Payment Reduced Open – Pending outcome

Reportable Event?

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Agenda for Today

Status of CMS’ Permanent RAC Rollout

Changes to Demonstration Project’s SOW

RAC Process Flow for Hospitals

Tracking RAC Activity

Reporting RAC Activity

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Available RAC Reports

RAC Accounts identified to Date by Audit Category

RAC Accounts Identified to Date by Audit Status

RAC Accounts Closed to Date With No Change in Medicare Payment

RAC Accounts closed to Date with Medicare Payment Decreases

RAC Accounts Closed to Date with Medicare Payment Increases

RAC Accounts Pending Final Outcome

RAC Payment Retractions to Date

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Available RAC Reports

RAC Payment Retractions by Audit Finding

Grand Total Non-Recoverable Dollars Lost Due to RAC Audits by Facility

Grand Total Non-Recoverable Dollars Lost Due to RAC Audits by Audit Finding

Total Accounts Rebutted – By Audit Finding

Total Accounts Appealed by Audit Finding

Total Accounts Appealed and/or Rebutted

Level 1 (through 5) Appeal outcomes

Results from RAC Demonstration Period

Martin Memorial Hospital System – Florida

60% of cases reviewed resulted in “no finding”

40% denied i.e. Medicare overpayment found

70% of all denials were due to medical necessity

16% of denials were overturned at level I appeal

84% of denials were overturned at level II appeal

Adventist Health – California

Of total Medicare payments retracted:

38% due to medical necessity

33% due to coding/DRG errors

28% due to IP Rehab medical necessity

2% OP # of units charged

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Tenet – RAC # of Accounts Identified to Date

10 72 583 1 120 3 79 0 100 200 300 400 500 600 700 Accts. not Combined Documentation Supports Service -After Review of Records

Dschg Status Not Medically Necessary - After Review of Records Op Billed as IP -After Review of Records Requests for Records - Pending Outcome Wrong units Chrgd

868 Accounts Identified in the initial RAC pilot.

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Tenet – Medicare Payment Retractions by Finding

-$859K Total MCR Retractions

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Key Website & Contact Information

www.cms.hhs.gov/RAC

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RAC@cms.hhs.gov

www.cms.hhs.gov/RAC/DOWNLOADS/RAC%20EVALUATION%20REPORT.pdf

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